According to the National Association of Realtors, the national average of housing affordability in 2009 was 169, which basically means that the typical family had an income that was 169% of the qualifying income to buy the median priced home in the community in which they lived.

Residents of this town can only afford 65% of the typical home selling in their community

Boston.com published a list of the 20 Massachusetts towns with the highest median income and the 20 towns with the lowest median income, so I came up with the median home prices in those communities (circa: 2009) and plugged the numbers into NAR’s affordability index calculation to determine which towns on the list were the least and most affordable.

Of the 34 towns I could obtain both median family income and median home sale prices, Weston, the Massachusetts town with the second highest median income, was by far the least affordable town to own a home. Weston had an affordability rating of just 65, meaning the median family income in Weston was only enough to qualify to buy 65% of the median priced home sale in Weston. So, it might be concluded that not only would the residents of Lawrence be more qualified to buy a home in their community than the residents of Weston, but Weston might be the least affordable town in all of Massachusetts. Surprising? I thought so. We don’t typically think that the citizens of our wealthiest communities are the most challenged to buy a home. Yet Weston wasn’t the only affluent community where residents appeared to be house rich and cash poor. The nine towns with the lowest affordability ratings in my analysis were among the state’s highest income communities. And perhaps, just as surprising, six of the state’s poorest communities were among the eight most affordable towns for residents to purchase a home.

Below I have listed the five least and five most affordable towns, with their affordability rating, from my analysis.

I did an analysis of 2011 Single-Family-Sales median sale prices based on the year the home was built. It made for what appeared to be a very simple and understandable chart that simply showed the older the era of the house, the less the median sales price. But don’t get fooled by it. It’s not age that is devaluing the home, like miles on a car, it’s that the newer the era of the home, the more features and benefits the home has which are creating value.

The older the home, the lower the value?

For example, the average size of the newly constructed U.S. home grew from 983 square feet in 1950 to over 2,300 square feet in 2004 according to the National Association of Home Builders. Over that time period, consumer demand for extra-large and supersized homes in Greater Boston mirrored the national trends. In my analysis of the single family homes that sold in 2011 and were built between 1945 and 1969, roughly 4% were larger than 3,000 square feet and about 2% were larger than 4,000 square feet. Compare that to the 32% of homes constructed after 2000 (and sold in 2011) which were more than 3,000 square feet and the 14% which were larger than 4,000 square feet.

The newer, bigger homes had more bathrooms as well. Of the single family homes that sold in 2011 that were constructed between 1945 and 1969, only about 40% had more than one full bathroom and about 6% had at least three full baths. But of those constructed after 2000, 95% had more than one full bathroom and over 25% had at least three full baths.

There are a host of other features adding value to newer homes as well, including more efficient heating (insulation, high efficiency, etc), better cooling systems (central a/c) and fewer known hazardous materials (no lead paint, uffi or asbestos).

So, in terms of value, maybe some folks see the age of a home as a direct correlation to value and maybe others see… “The Bates Formula for Predicting Super High Home Values” as the lens for understanding value? LOL

Towns assess your home’s property tax contribution by first having the assessing department determine a value for your home and then multiplying the value by the town’s property tax rate. You’ll owe the town x number of dollars per thousand of the value assessment. So if you bought your $500K assessed home in Dover ($11.70 per thousand assessed) instead of Sherborn ($17.72 per thousand assessed), you’d pay $5,850 (500x$11.70=$5,850) in annual property taxes instead of $8,860 (500x$17.72=$8,860). That’s a savings of $250 a month, $3,000 a year or $30,000 over 10 years.

About a dozen Massachusetts communities offer a residential exemption on property taxes which is a further savings for owner occupied home owners. To get a residential exemption in these communities all you have to do is owner occupy the home you buy and let the city know that you are owner occupying it. For example, Cambridge offers a residential exemption and Newton doesn’t. So if you bought your $500K assessed home in Cambridge ($8.16 per thousand assessed) instead of Newton ($10.90 per thousand assessed) you would not only save $2.74 per thousand assessed, but you would also be able obtain a residential exemption of $198,095 off the assessed value on your Cambridge home, a savings of around $1,623 on your property taxes. End result, your Newton property tax bill would be $5,450 a year and your Cambridge tax bill after the residential exemption would only be $2,463 a year, a savings of around $250 a month, $3,000 a year, or $30,000 over 10 years.

I have ranked the property tax rates of 50 key Massachusetts communities below. I have also noted the communities which offer Residential Exemptions as well as the amount of the exemption.

(Based on an analysis of MLS Public Records section conducted in February 2012. With the exception of just a few towns, 2011 Tax Rate is the rate listed. Residential Exemption amounts were determined by contacting town’s assessors office)

If you wonder where your town is getting all the money to run the government, take a look at your property tax bill.

In Boston, property taxes fund more than 65% of the budget. In Brookline, more than 75%. In Newton, nearly 85%. The odds are, your town budget receives a similar percentage of its revenue directly from the property taxes it collects.

Rising revenue from the property tax levy seems almost as certain as “death and taxes.” Although the annual increase in property taxes is governed by Proposition 2½, according to the Boston city budget, “The property tax levy has been the City’s largest and most dependable source of revenue growth.” Today, the city is generating more than $1.5 billion in property tax revenues.

Increased revenue from property taxes is a sure thing in towns outside of Boston too. For example, between 1999 and 2013, revenue from property taxes in Brookline went from $92.2 million to $169 million (estimated) and increased every year. In fact, between 2004 and 2013 (estimated), the general fund budget total grew $57.1 million and the real estate property tax contribution to it grew $55.6 million. In other words, property taxes funded 97% of the increase.

In boom times, properties’ values appreciate and so the amount of property taxes they generate increase too. Also in boom times new properties are developed and taxed. But if you think property taxes will go down in the bust years, think again. To increase revenue in a down market, all lawmakers have to do is change the rate at which property is taxed. When there was a hubbub about the City of Boston raising property taxes in a down market, a Revenue Department spokesman responded, “it’s always been that way, even if values go down, taxes go up…It’s like saying that it’s extraordinary that the sun rises every day”(Boston Real Estate Law News in January 2011). The same is true outside the city. In the most tumultuous economic year in recent times, 2009, the Brookline property tax levy increased 8.5%. That’s about double Brookline’s average annual increase.

Chilmark, a town on Martha’s Vineyard with a year round population of 843, has been reported to have the highest average property value of any town or city in Massachusetts. This is just one of the signs that home values in Massachusetts’ best second-home markets can often completely eclipse the home values in Boston and its best suburbs.

Of the 1,064 single family homes listed in MLS public record in Chilmark, nearly two-thirds are assessed at a value of over $1 million. But Chilmark isn’t the only island community where super high home values are super abundant. Consider this, while an analysis I did of MLS public records shows upscale Wellesley has 50 single family homes assessed at a value of over $4 million, Nantucket has 241. In fact, if you include the zoning code “Residential –Multiple Buildings” zoning—which is pretty much single family homes with a guest house or two — Nantucket has at least 580 homes whose assessed value is over $4 million.

I also searched MLS public records for homes with an assessed value of over $8 million, and found only 4 in Boston and 16 in the wealthy suburb of Weston. Yet, Edgartown, one of the Vineyard’s chief tourist destinations, has over 100 (includes “Residential-Multiple Buildings”) residences with assessed values over $8 million.

What makes homes on these islands so valuable? One of the assessors I talked to referred to Mark Twain’s famous quote: “Buy land, they’re not making it any more.” I guess the value of land means more when you have an ocean for a front yard. That’s apparently why land on islands has a higher percentage of a property’s assessed value compared to properties on the mainland. The different assessor’s value bias is easily seen when comparing a land-locked

55 Hulbert Ave, Nantucket

property to ocean front. For example, 55 Hulbert Ave, Nantucket has an assessed value of $11,824,000 and according to its assessment, the 16,326 square foot lot’s value of $10,089,000 comprises about 85% of the total value. Comparatively, 144 Edmunds,Wellesley has an assessed value of $9,792,000 but assessors only attribute its .98 acre as accounting for about 7% of the total value.

I asked Bernadette Maglione, a friend of mine, as well as a realtor who may sell 40 homes in Nantucket this year, what accounts for the Island’s incredible values. She touched on the scarcity of land, the beauty of the island, and the high quality of construction.

In its May 2006 issue, Boston Magazine named the 50 Wealthiest Bostonians. Logic has it that these folks could live anywhere they wanted in the Bay State. Where did they choose to live?

The 11 Towns ties with 1 each were Dover, Hopkinton, Lincoln, Manchester-by-the-Sea, Nahant, Norwood, Osterville, Swampscott, Wayland, Belmont, and Marblehead. The magazine noted one of the 50 had 2 residences.

Boston was by far the most popular single location of the wealthiest. In Boston, they lived almost exclusively in Back Bay and Beacon Hill. In Beacon Hill, the wealthiest preferred single family homes in Louisburg Square, Chestnut Street and Brimmer Street. In Back Bay, the most popular address for the wealthiest Bostonians was the original Ritz Carlton condominiums located on the corner of Arlington and Com Ave.

As popular as it was to live in Boston, the majority of the 50 wealthiest Bostonians lived chose the privacy of suburban locations. A few were able to make their abodes even more private by purchasing adjacent properties, such as the CEO that purchased a $2.8 million property in 1998 and then spent $6.7 million on the adjoining address in 2008. New England Patriots owner Robert Kraft also appears to have spent $2.5 million in 2004 to purchase the two acres of land (and buildings) next to the 3.5 acres on which his 11,000-square-foot Brookline house is located.

While some of the wealthiest lived abundantly on large estates — for example, John F. Fish (#33) of Suffolk Construction whom, according to public record, has a 14,421-square-foot home on four acres in Milton — others lived more modestly, like John Abele of Boston Scientific, #3 on the list. This man, estimated to be worth more than $3.3 billion, appears to have sold his home on Fairhaven Hill in Concord for a modest $1 million in 2007. And at least one of the 50 wealthiest Bostonians was a renter: Jack Welch, the famed former CEO of General Electric.

Real Estate value as a metaphor is not lost on the wealthiest Bostonians as evidenced when Henry Termeer, the CEO of Genzyme and #42 on the list, communicated to the Boston Globe that he thought an $18.5 billion offer for Genzyme was low by saying “this is not a fixer-upper; this is beachfront property.”

Needham, a town bordered by three perennial high-volume million-dollar-selling communities (Newton, Wellesley and Dover) is about to become a town known for its own high volume of million-dollar sales.

In 2004, Needham recorded 50 million dollar single-family sales in MLS. In 2007, it registered 63. And in 2010, with 71 million-dollar sales, it was the 5th most prolific suburb in Greater Boston in that category. Needham is also the only community that this blog covers that had more million-dollar sales in 2010 than it did in 2007 or 2004.

Why has Needham boomed when other million-dollar towns busted? I believe it has to do with the fact that this nice suburb — complete with a solid school system — is becoming an “up-and-coming” million-dollar community.

Residents of more established communities believe buyers will flock to their community based on reputation. As such, sellers in those communities typically don’t spend time updating and upgrading (maybe that’s why you don’t see Home Depots in established luxury communities like Newton, Wellesley and Dover?). Up-and-coming towns, on the other hand, are always known for great finishes. These communities use new, bright and shiny features and benefits to make up for the lack of a high-browed reputation. This certainly seems to be the case with Needham versus its neighbors. In 2010, 62 percent of Needham’s million-dollar sales had been built within the last three years. That’s about five times the rate of neighboring Newton (about 12 percent) and 2.5 times the rate of neighboring Wellesley (about 25 percent). Outside of real estate, “new” beats “used” every day of the week, so it’s no wonder that many buyers chose Needham’s new construction over the “classic” options in neighboring communities.

And if million-dollar buyers were just considering new construction homes, they would see Needham’s new million-dollar construction listings sold for $1.37 million on average, more than $500K less than Newton ($1.89 million average) and $800K less than Wellesley ($2.17 million average). So it’s no wonder why many new construction buyers bought in Needham.

If these value discrepancies continue, Needham’s million-dollar sales growth is sure to continue, as well.

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About David Bates

David Bates is a top producing real estate agent who has sold condominiums, single families, and investment property in a variety of Boston neighborhoods and many of the city's better suburbs.

His insights appear not only in in this original content blog, but also in the most established local media, including Banker and Tradesman, Boston Magazine, Boston.Curbed.com, The Boston Globe, The Boston Herald, Bloomberg News and NECN.